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SEC sues Florida firm that raised $410 mln for IPO-linked fraud -filings

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NEW YORK — The U.S. Securities and Trade Fee on Friday sued a Florida agency it mentioned raised at the least $410 million by fraudulently promising buyers entry to non-public firms that had potential to conduct preliminary public choices.

In a civil criticism filed in Manhattan federal courtroom, the SEC additionally sought an asset freeze in opposition to StraightPath Enterprise Companions LLC and its three founders, and the appointment of a receiver to arrest “ongoing fraud” on the agency.

The SEC mentioned StraightPath pitched its funding automobiles as a method for strange buyers to personal “extremely coveted,” hard-to-find pre-IPO shares in such firms as plant-based burger maker Unimaginable Meals and cryptocurrency alternate Kraken.

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However the SEC mentioned the Jupiter, Florida-based agency usually lacked the shares to again up the investments, made “Ponzi-like” funds to some buyers, and improperly commingled buyers’ and the agency’s property.

It additionally mentioned StraightPath charged “exorbitant, undisclosed charges,” permitting founders Michael Castillero, Francine Lanaia and Brian Martinsen and fund supervisor Eric Lachow to pay themselves about $75 million and their gross sales brokers practically $48 million.

StraightPath says it fees buyers a one-time 5% “due diligence” charge, plus 2% administration and 1% expense charges.

In a letter to U.S. District Decide Lewis Kaplan, legal professionals for StraightPath known as the SEC requests “wholly unwarranted,” citing the agency’s years of cooperation and saying arguments that StraightPath poses a hazard “pressure credulity.”

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StraightPath’s legal professionals additionally mentioned the SEC “apparently prompted” the U.S. Division of Justice to open a grand jury probe into the agency, and that asset freezes may intervene with the person defendants’ defenses in opposition to that legal probe.

The Justice Division didn’t instantly reply to a request for remark.

In response to courtroom papers, StraightPath raised the $410 million from greater than 2,200 buyers in at the least 14 international locations between November 2017 and February 2022, when it agreed with the SEC to cease soliciting new investments.

The SEC mentioned StraightPath funds maintain greater than $200 million of securities however are quick $14 million of pre-IPO shares for seven firms, together with Unimaginable Meals and Kraken.

The case is SEC v StraightPath Enterprise Companions LLC et al, U.S. District Court docket, Southern District of New York, No. 22-03897. (Reporting by Jonathan Stempel in New York; Modifying by Matthew Lewis, Barbara Lewis and Chizu Nomiyama)



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